Brand essence of luxury brands : the effect of extrinsic and intrinsic distinctive features in the experience of a brand : are distinctive features essential for the creation of customer equity for luxury brands?

Brand essence of luxury brands: the effect of extrinsic and

intrinsic distinctive features in the experience of a brand

Are distinctive features essential for the creation of customer equity for luxury brands?

Study: MSc Business Administration - Marketing track

Institution: Amsterdam Business School / University of Amsterdam Course: Master Thesis – final version

Thesis supervisor: Drs. ing. A.C.J. Meulemans Second supervisor: Prof. dr. J. Tettero

Student: Els E.B. Greuter Student number: 10874194 Date: January 29th_{, 2016}

TABLE OF CONTENTS

ABSTRACT ... 4

1 INTRODUCTION ... 5

2 THEORETICAL FRAMEWORK ... 8

2.1 LUXURY BRANDS ... 8

2.2 DIFFERENTIATION AND BRANDING ... 10

2.3 DIFFERENTIATION AND BRAND ESSENCE ... 12

2.4 INTRINSIC DISTINCTIVE FEATURES AND EXTRINSIC DISTINCTIVE FEATURES ... 13

2.5 CUSTOMER EQUITY ... 15

2.5.1. Value Equity ... 17

2.5.2. Brand Equity ... 17

2.5.3. Retention Equity ... 18

2.6 CONSUMER CHARACTERISTICS ... 19

2.7 RESEARCH OBJECTIVE AND RESEARCH QUESTION ... 21

2.8 CONCEPTUAL MODEL ... 21 3 EMPIRICAL RESEARCH ... 23 3.1 BRANDS ... 23 3.1.1 Chanel ... 23 3.1.2 Armani ... 23 3.1.3 Hugo Boss ... 24 3.2 RESEARCH DESIGN ... 24 3.3 QUALITATIVE PRE-TEST ... 25 3.3.1. Sample restrictions ... 25 3.3.2 Method ... 26 3.3.3. Results ... 27

3.3.4. Conclusion (overview) of results ... 30

3.4 ANALYTICAL STRATEGY MAIN ANALYSES 1 AND 2 ... 30

3.5 MAIN ANALYSIS 1 – CUSTOMER EQUITY ... 33

3.5.1. Sample restrictions ... 33

3.5.2 Method ... 34

3.5.3. Results ... 35

3.5.4. Conclusion (overview) of results ... 41

3.6 MAIN ANALYSIS 2.1 - EXTRINSIC DISTINCTIVE (BRAND – RELATED) FEATURES ... 42

3.6.1 Sample description ... 42

3.6.2. Method ... 42

3.6.3 Results ... 44

3.6.4 Conclusion (overview) of results ... 52

3.7 MAIN ANALYSIS 2.2 - INTRINSIC DISTINCTIVE FEATURES ... 52

3.7.1. Sample restrictions ... 52

3.7.2 Method ... 53

3.7.3. Results ... 53

3.7.4. Conclusion (overview) of results ... 57

3.7.5. Overview of hypotheses testing results ... 58

4 GENERAL DISCUSSION ... 59

4.1 DISCUSSION OF EMPIRICAL FINDINGS ... 59

4.1.1. Pre-test ... 60

4.1.2. Main analysis 1 ... 61

4.1.3. Main analysis 2.1 ... 62

4.1.4. Main analysis 2.2 ... 65

4.2 ADDITIONAL FINDINGS PER LUXURY BRAND ... 66

4.2.1. Chanel ... 66

4.2.3. Hugo Boss ... 68

4.3 THEORETICAL IMPLICATIONS ... 69

4.4 MANAGERIAL IMPLICATIONS ... 70

4.5 LIMITATIONS AND RECOMMENDATIONS FOR FURTHER RESEARCH ... 70

5 REFERENCES ... 72

6 APPENDICES ... 77

APPENDIX A:QUALITATIVE PRE-TEST QUESTIONNAIRE ... 77

APPENDIX B: QUESTIONNAIRE MAIN ANALYSIS 1 ... 80

APPENDIX C: QUESTIONNAIRE MAIN ANALYSIS 2.1 ... 84

APPENDIX D: QUESTIONNAIRE MAIN ANALYSIS 2.2 ... 89

APPENDIX E:FREQUENCY ORDER MENTIONED BRAND FEATURES AND RECODED FEATURES ... 90

APPENDIX F:ADDITIONAL TABLES AND FIGURES RELATED TO RESULTS ... 94

This document is written by student Els E.B. Greuter who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

ABSTRACT

Luxury brands are the types of brands that have built a whole story and feeling around them include their own distinctive features. In the current literature is a little known so far about how to differentiate luxury brands (e.g. luxury perfume brands; Chanel, Armani and Hugo Boss) to raise the customer equity, without weakening the brand's essence by focusing on both intrinsic and extrinsic distinctive features and how this differs on the basis of consumer characteristics. The author reports the development of a valid measure of the luxury brand’s customer equity (i.e. main analysis 1, zero measurement) and analyse this effect to compare and relate it to the statistics of extrinsic and intrinsic distinctive features of the three luxury brands (i.e. main analysis 2, first measurement). This is done by carrying out a quantitative research to use cross-sectional surveys follow by an experimental design. The main takeaway of this study is that the increase of customer equity for luxury perfume brands only can accomplish by the increase of brand equity. Additionally, intrinsic distinctive features are related to and can raise the luxury brands’ value equity. The fit between intrinsic and extrinsic distinctive features of luxury brands enhances the customer equity but this is luxury brand dependent and is only the case for Chanel in this research. This study does not provide conclusive evidence regarding which customer characteristics brand managers should invest in further research is needed to investigate it.

Keywords: Luxury branding, extrinsic distinctive features, intrinsic distinctive features,

1 INTRODUCTION

A stable brand essence / image for luxury brands is crucial for their success (Keller, 2009). The brands’ essence is characterized as the core of the brand, namely to what extent a brand feature is perceived as distinctive and essential for the creation of a strong, favourable and unique brand image (Keller, 1993). Specifically, luxury brands are the types of brands that have built a whole story and feeling around them, which is build by distinctive brand – related features in a highly competitive market environment. The creation of experience is most important for the success of luxury brands (Atwal & Williams, 2009). The brands’ essence consists of both intrinsic and extrinsic distinctive features (Ahn, 1998). Intrinsic distinctive features are features within the product of a brand. These features are characterized as features (e.g. taste, smell) that a customer cannot see but can experience. In contrast, extrinsic distinctive features are linked to the things, which can see outside of the product (e.g. brand, labelling) (Enneking, Neumann & Henneberg, 2007). For example, personal care products like perfumes are bundles of both tangible (i.e. extrinsic) and intangible (i.e. intrinsic) attributes and are designed to satisfy the consumer (Keller, 2009). According to Graeff (1997) the creation of an active and recognizable brand image must link to a set of circumstances in which the product is consumed and used. The development of a feeling and storytelling around the luxury brand is one of the key ways to communicate and transfer the brand image to the consumer.

The effect of luxury values on purchase intention and behaviour of consumers is widely investigated. For example, Loureiro and Araújo (2014) show both individual (i.e. materialistic, self-identity, self-gift, extravagance, self-directed pleasure and life enrichment) and social (i.e. prestige relations and status conspicuousness) luxury value (Wiedmann, Hennigs & Siebels, 2009). Furthermore, Enneking et al. (2007) simultaneously evaluated these intrinsic and extrinsic product attributes of food (i.e. three carbonated soft drinks) by means of a choice-based conjoint experiment. To my knowledge, in the literature there is no research about modelling the choice of luxury brands as a function intrinsic and extrinsic product features and of consumer characteristics. The fact that no such study exists in the domain of luxury brands is a pity because such a study could provide us with many new insights on how to manage luxury brands even better. This research shows how important intrinsic and extrinsic product features of luxury brands are, how these affect the brand choice and how these can differ on the basis of consumer characteristics. The effect of intrinsic and extrinsic distinctive features of luxury brands in the experience of a brand is studied by the compensation of three luxury perfume brands (i.e. Chanel, Armani and Hugo Boss). Health and Beauty Care includes luxury products such as higher-priced cosmetics and perfume (Verhetsel, 2005). Due to the accessible price of perfumes, these types of luxury brands are buyable for almost every individual in for example hypermarkets. As

explained a few sentences earlier, perfumes have both clear intrinsic and extrinsic distinctive features that can experience by consumers.

Additionally, the experience of a brand can create through the three drivers of customer equity, namely value equity, brand equity and relationship equity (Lemon, Rust & Zeithaml, 2001). The creation of customer equity for a luxury brand is really important for example to generate customer loyalty which is likely to result in advantages for a brand (Lemon et al., 2001). Customer equity is critical to a firm’s long-term success and thereby it is named as a proxy for the firm’s value (Lemon et al., 2001). Hence, this research also examines whether the comparison of three luxury brands and brand choice of customers on the basis of intrinsic and extrinsic product features, and also has an explanation for customer equity of these brands. The studies these three luxury brands have undertaken each show the importance of customer equity to these brands. This research also shows how these three brands are compared in relation to the drivers of customer equity (i.e. brand equity, value equity and retention equity) to demonstrate the relative meaning of these three luxury brands on the basis of customer equity. Moreover, this study indicates how this compensation is linked to the choice of a luxury brand based on intrinsic and extrinsic distinctive product features and how this results differs between customer characteristics.

In short, little is known about how brand managers can differentiate their luxury brand to minimize its sensibility to the competitive environment and to maximize the customer equity toward its key target audience. By focusing on both intrinsic and extrinsic distinctive features without weakening the brand's essence. Hence, the focus of this research is on the distinction between both intrinsic and extrinsic distinctive features of luxury brands (i.e. fragrances brands) in to relation to the customer equity of these brands and how this relation is compared and related to each other.

The research question is formulated as follows: ‘‘in which way do consumer characteristics

moderate the relation between intrinsic and extrinsic distinctive (brand-related) features of luxury brands and their customer equity?’’

To answer the research question, this research follows the structure by the start of a review of the current literature about subjects as luxury branding, differentiation, brand essence, intrinsic and extrinsic distinctive features, customer equity drivers and customer characteristics. Thereafter, an empirical research is done with includes the research design and analytical strategy. The sample restrictions, methods, statistical results and a result overview of the pre-test, main analyses 1, 2.1 and 2.2 also include this chapter. An important note is that the extrinsic distinctive brand-related features (e.g. ‘Mannelijk’, ‘Klassiek’) of the three luxury brands in this research are investigated in the pre- test and are mentioned in Dutch since respondents from the Netherlands conduct the survey.

After all, this thesis discusses the empirical findings and additional findings per brand. Moreover, the last chapter implies both managerial and theoretical implications and gives an advice for further research in this field of marketing.

By combining intrinsic and extrinsic brand-related features, the theoretical implications of this study is the investigation of both the main effects of customer equity and the interactions between the scent of smell and the marketing mix elements. In this way it is possible to determine the key drivers for luxury brand choice.

Managerial implications of this research give advice relate the customer equity of three luxury brands, namely Chanel, Armani and Hugo Boss. It is likely that this produces insights that are useful for luxury brand managers to create and devise brand strategies for luxury perfume brands or simply luxury brands.

2 THEORETICAL FRAMEWORK

2.1 Luxury brands

Wealth, power and exclusiveness are terms that are always linked to luxury goods (Loureiro & Araújo, 2014). Luxury is associated with having a ‘’good taste’’, to differentiate the users from other consumers (Loureiro & de Araújo, 2014). The global luxury industry experiences stable growth for the last two decades. To manage a luxury brand it involves specificities, it is complex and requires a constant and clear approach to create and maintain success. Buying luxury goods involves an emotional relationship between the brand and the consumer (Loureiro & de Araújo, 2014). Since luxury goods are bought globally, differentiation is an important pillar of the brand equity to create brand strength (Keller, 2009). Within every style of luxury there are many brands which all want to reach growth to find new customer and maintain the current one (Keller, 2009). It is important to adapt the right brand architecture to luxury brands (Keller, 2009). But within a market in which there is plenty of choice, what are the criteria on which consumers to select their definitive favourite luxury brand?

Loureiro and de Araújo (2014) tested the effect of luxury values (individual and social) and also the effect of past experiences on behavioural intentions. With this research, the authors extend the theory of planned behaviour. Specifically, they show luxury values as external variables. Additionally, Loureiro and de Araújo (2014) indicate that the past experience of a consumer is a direct input for behavioural intentions to pay more and to recommend a luxury brand. This shows that individual luxury values have a positive effect on the behavioural intentions of the consumers. These findings show a negative effect result for social values on behavioural control, but it has a positive effect on subjective norms (Loureiro & de Araújo, 2014). However, the authors show that the past experience of consumers has not a significant effect on intentions. So if past experience is not a critical factor, what is it that makes consumers choose for e.g. Chanel instead of Dior? The answer to this question is likely to make brand managers extremely happy since it confirms the crucial consequence of their work effort. Earlier research by Keller (1993) shows that the key factor for customers to choose a particular brand is a significantly different and attractive brand image. Additionally, Dubois and Duquesne (1993) confirm similar results regarding the effect of brand image on consumers’ perception of luxury goods. The authors show that status label or image is associated with a product and is frequently valued higher than the product itself. Buying luxury goods characterizes a great way of showing one’s values (Loureiro & de Araújo, 2014) since a luxury good signals exclusivity, familiarity and respect by other consumers. This implies again that the image of a brand and luxury values have a huge effect on the intentions and preferences of consumers for a particular luxury brand. The fact that the brand image of luxury brands influences consumers’ perception of product judgments so

powerfully, makes luxury an interesting product category to conduct a study on what brands are all about and what it is that makes them all seem to be different (Greaff, 1997). In an extremely competitive market where only little distinction can be made by brand differentiation, it is highly essential for brand managers to get a deeper understanding about how to increase the success of their own brands in the marketplace (Keller, 2009). Hence, this study focuses on three well-known global luxury brands Chanel, Armani and Hugo Boss. In the subparagraph below, the specific product group of luxury brands (e.g. luxury perfume brands) in this research is explained.

Scent - Perfume

Luxury goods define product groups like fashion, accessories and cosmetics (e.g. perfume) (Stankeviciute & Hoffmann, 2010). Fragrances (e.g. luxury perfume brands) create a sense of smell; it is the intrinsic feature a consumer experiences.

Long time ago, cosmetics, toiletry and fragrance products were only available for the wealthy people. The first beauty products were mostly developed within temples or monasteries (Stone & Samples, 1990; p. 23). Currently, in USA there are more than 500 companies that sell over 20.000 cosmetics, toiletries and fragrances brands (Ainsworth, 1992). By introducing a person, a scent plays an important role (Markham & Cangelosi, 1999). For example by the creation of an image in a way people show their selves (DeLong and Bye, 1990). Women choose the bottle and colour of perfume package to match their mood, or to support the image she has about herself or the person she want to be. Products, especially personal care products like perfume and cologne consists of extrinsic and intrinsic attributes both create to make the customer happy (Markham & Cangelosi, 1999).

Globally, there are approximately 800 perfume brands (Markham & Cangelosi, 1999). In recent years a big market was built to create the consumer’s primitive and emotional connections to scent. All commercial perfumes have different purposes; one shows product benefits, while the others add romantic benefits. One can say ‘’image is everything in the ‘beauty’ business’’ (Threlfall & Ritz, 1994). Moreover, marketing and the design of a brand image in the perfume industry are more important than the scent itself (Wilkie, 1995).

Nowadays, perfume designers develop most of the perfumes on the basis of instructions they get from marketing and on their personal preferences. After the development of a perfume, production starts in perfume houses. The most popular perfume types in Europe embrace floral, natural/sporty, citrus and oriental/spicy fragrances nodes. Furthermore, the most use retail prices of perfumes are between a range of €40 – €60 (Markham & Cangelosi, 1999).

2.2 Differentiation and branding

Differentiation is everywhere. Constantly, everybody (e.g. producer or seller) tries to distinguish his or her offer (Levitt, 1980).

Levitt (1980) shows that differentiation is essential for the success of the marketing of a brand. In this way, the sensitivity of the brand is minimized to the activities in the competitive environment. For example, when prices of goods are reduced, brands with more differentiation lose a few customers (Caves & Williamson, 1985). According to Kotler (2008; p. 442), a brand is outlined as a name, term, sign, symbol, or design that can used to identify different makers and sellers in the market. The key to success of a brand is the presence of a strong and favourable evaluation of brand associations, which are unique to the brand and means, advantage in compensation to other brands (Keller, 1993). To minimize competition (i.e. to drive them out of business), according to the economic literature it is important that brand managers create a differentiation of their brand(s) from others (Romaniuk, Sharp, & Ehrenberg, 2007). Keller (2009) defines differentiation as ‘’a way to measure the degree to which a brand is seen as different from others’’. Differentiation makes the brand distinctive in comparison to other brands. Hence, consumers are more loyal to the brand and the customer base is kept loyal. One can say that branding creates differentiation for a brand. Furthermore, one can say that the essence of branding is differentiation from non-branded goods and branded goods alike. Through differentiation the brand can stand out compared to other brands, and in this way brand relevance is created. If a brand cannot differentiate itself from other brands in the market, the brand is perceived as less favourable because it does not serve its main purpose – to help us recognize and compare it to others. In the subparagraph below, differentiation in relation to luxury branding is explained.

Differentiation and Luxury branding

During the development of branded consumer products in the 19th century, the term of branding is born (Low & Fullerton, 1994). The brand and brand image of luxury brands represent the fundamental competitive advantage, which results in growth and value for companies in the luxury industry. Another condition for the success of a luxury brand is a strategy through which brand managers try to make a brand distinctive from others and therefore minimize the sensibility to the competitive environment (Sharp & Dawis, 2001). To give an example, extrinsic features of Armani are communicated as ‘Luxury’ and ‘Femininity’ and those of Chanel are communicated as ‘Luxury’, ‘Femininity’, and ‘Paris Chic’. The two extrinsic features ‘Luxury’ and ‘Femininity’ are sensible because both Armani and Chanel have competition from each other. Nevertheless, the extrinsic feature ‘Paris Chic’ differentiates Chanel from Armani and reduces the sensibility of the brand Chanel because it does not have competition of Armani on this extrinsic feature. The positive distinctive brand

image of Chanel results in the fact that the firm is able to earn a high premium price, since consumers would like to pay more for the goods (Starr & Rubinson, 1978). Customers judge traditional luxury brands mainly on the basis of differentiation and esteem (Keller, 2009). In compensation they do not score close to relevance and knowledge (Keller, 2009). Keller (2009) shows that brand managers of luxury goods have to observe these perceptions carefully in order to guarantee that a luxury brand keeps its unique image. These perceptions are some facts about why luxury brands are seen as one of the strongest examples of branding (Keller, 2009). Brand managers have to manage the essence of their luxury brands in an ever and fast changing marketing and competitive environment. Most of the changes result in forces; examples of these forces are upcoming technologies, globalization and different customer cultures (Keller, 2009). To face these forces, Keller (2009) names the importance of brand managers of luxury brands being well educated, skilled and know their brands in the most essential way. One can see this fact as a precondition for success of a luxury brand (Keller, 2009). Brand managers of luxury brands have to make trade-offs in their marketing which are often big challenges and which frequently means the difference between success and failure. One of these trade-offs is classic versus contemporary images. Most of the luxury brands have a history, heritage and experience that are well-known by current customers (Keller, 2009). However, for the younger target audience these features are not relevant. More modern and fashionable features are more relevant to luxury brand to be adopted by potential younger customers (Keller, 2009). For luxury brands and in the market of luxury goods, the brand image has such a large impact on the brand evaluation; new insights about branding are crucial for brand managers to fulfil the ultimate goal of brand managers to build a strong, favourable and unique brand that creates an advantageous strategic position within the marketplace (Keller, 2009). Additionally, more knowledge about distinctiveness among competitors in the market of luxury is needed. Overall, as the result from the constantly changing internal and external environmental circumstances, companies frequently face new situations that require an innovative and proper branding strategy. This is the reason why brand differentiation becomes difficult to create and maintained for luxury brands (Keller, 2009). To conclude, the idea that distinctive features are important is widely adopted. After all brand managers assume that distinctive features can, if liked by the consumers, lead to a behavioural preference for a brand and thus to the basis of sustainable competitiveness. However, which features of the brand need distinctiveness in order to achieve this strategic competitive position is unclear. More in-depth knowledge of distinctiveness is missing and creates a dilemma for the brand manager who does not know whether the distinctive features of the luxury brand are the right ones, how to treat distinctive features and whether distinctive features leads to an increase of customer equity towards to the brand. Furthermore, in the current literature in-depth knowledge on how the effect of

liking brand features varieties on the basis of the consumers’ personal characteristics is missing (e.g. gender, age and the human personality dimensions of Aaker, 1997).

2.3 Differentiation and brand essence

Brand manager need to specify the brands’ essence. First, it is important for brand managers to know the brand core that defines the brand equity. Second the differentiation in the competitive environment and third the reason of existence in the market (Kotler, 2000). When the brand core or essence is identified, brand managers have to clarify what makes the brand into what it is and what makes it different in the competitive environment in relation to the mind of the consumers. To define the essence of a brand, brand managers have to know from which features in the brand essence result (Ahn, 1998). The treatment and position of a particular brand feature within the complete brands’ marketing strategy, explains to what extent a brand feature is perceived as distinctive and essential. It is not easy to change brand features that are essential. A consumer does not see a brand as that particular brand anymore when the essence of that brand is lost. Nevertheless, modifications and alterations are needed to maintain the consistency of the brands’ essence in the future (Keller, 1999). As there is a possibility for weakening the brands’ essence, most of the brand managers do not alter these features (Van Rekom, Jacobs & Verlegh, 2006). To maintain a strong brand over the coming years, it is important to define which brand features are essential and needed to keep (Keller, 1999). Similarly, it is important to define which features are unimportant and can be altered without weakening the essence of the brand. Keller (2009) defines ten characteristics of luxury brands. Number one of his research is ‘’maintaining a premium image for luxury brands is crucial; controlling that image is thus a priority’’. Keller (2009) shows the importance of maintaining the brand essence, the image of the brand. The success of a luxury brand is based on the premium image; in this way it is justified to ask a premium price. The premium image of a luxury brand rotates around both extrinsic (e.g. prestige) and intrinsic (e.g. novel) specific product and service features. The premium image of a luxury brand is designed to create a worldwide relevance since the target audiences is most of all rich. Keller (2009) mentions that luxury brand managers need to ensure a brand image (by intangible brand aspects), which is strong, steady and solid in the long run. One can say that it is necessary for brand managers to clarify the role of distinctive features in the creation of the brands essence. It is likely that only in this way it is possible for brand managers to have a significant and expressive distinction in the eyes of the consumer. Furthermore, a big difference is if the distinctive features are treated as an essential or as a peripheral brand feature. First, differentiation through storytelling and a strong brand image are very important for luxury brands. And second the fact that these terms are core in

branding and marketing strategy literature. Hence, it is interesting to investigate the relation between distinctiveness and the brand essence of luxury brands. The aim of this research is to investigate in which way both intrinsic and extrinsic distinctive features explain the brands’ essence, and if these lead to the creation of a sustainable customer equity of the luxury brand in order to design a significant and solid differentiation without weakening the brands’ essence.

2.4 Intrinsic distinctive features and extrinsic distinctive features

Adding new features to a product or brand is one of the most common methods for differentiation (Nowlis & Simonson, 1996). Brand managers have to consider both the characteristics of a brand to which the features are added and the characteristics of the buyer’s task (Nowlis & Simonson, 1996). A new brand feature has more contribution to high-priced brands; in the situation where the brand is less known in the market. In compensation to low equity brands, high-equity brands (e.g. high-price and high perceived quality brands) gain more from new features. In contrast, for low quality brands a new feature reduces buyers’ price sensitivity. This effect is not found for high quality brands (Nowlis & Simonson, 1996).

In the literature there is a long-term interest in the effect of combining both intrinsic and extrinsic features in product evolution. The study of Moskowitz (1994) shows that a sensory study needs to cooperate with recent market research methods, to create methods that are useful to evaluate both extrinsic as well as intrinsic product features and imaginable effects between them. It is not enough to focus only on intrinsic product features, since the current market is fast growing and moving (Enneking et al., 2007). Troyer and Craik (2000) define intrinsic features as ‘’an incidental aspect of the stimulus itself, such as colour, font, or voice of presentation. Extrinsic context is not part of the stimulus itself, but presumably part of the overall encode event’’. Extrinsic product features such as factors of the marketing mix (e.g. advertising) also influence customers. Hence, one can say that it is necessary to have a complete product expression for an effective innovation. Knowing the comparative meaning of how product features affect selection in store is important to the success of a new product introduction (Enneking et al., 2007). Enneking et al. (2007) simultaneously evaluated intrinsic product features (i.e. taste) and extrinsic product features (i.e. brand and labels) of three soft drinks by means of a choice-based conjoint experiment. This study shows that consumers’ preferences of a sweetening system (i.e. intrinsic product features) are extremely dependent on brand communication (i.e. extrinsic product features). Furthermore, this research argues how advantageous market segmentation (i.e. customer characteristics) is in sensory analysis. Moreover, the binding of different product and brand features is important for

success. Feature binding helps to combine different stimulus features and allows customers to memorize bound object (Wheeler & Treisman, 2002). Different studies have recently tried to contrast the effects of intrinsic and extrinsic binding. The current literature about customer perception shows that intrinsic binding is easier than extrinsic binding (Xu, 2002; Xu, 2006). Additionally, Karlsen, Allen, Baddeley and Hitch (2010) imply that intrinsic binding has more efficient binding and / or more automatic binding than extrinsic binding. Ecker, Maybery and Zimmer (2013) also tested binding of intrinsic and extrinsic features. The authors show that binding of intrinsic features (i.e. intra-item information) but not extrinsic features (i.e. contextual information) is essential in visual working memory, thus demonstrating that there is a link between perception, implicit and explicit long–term memory. One can say that both intrinsic and extrinsic features are important to various domains of human cognition. Hypothesis 1a until 1c are based on the extrinsic distinctive brand-related features. The

brand-related features for each of the three luxury brands are examined in the pre-test. For hypotheses 2a en 2b general extrinsic distinctive features are used for testing.

H1a: In general, explicit extrinsic distinctive brand-related features (i.e. ‘Klassiek’, ‘Luxe’,

‘Duur’, ‘Chique’, ‘Elegant’, ‘Fris’, ‘Jong’, ‘Mannelijk’, ‘Italiaans’, ‘Mode’, ‘Klasse’, ‘Zakelijk’, ‘Pakken’ and ‘Toegankelijk’) have a positive increasing effect on the brand equity of luxury

brands.

H1b: Of the 14 extrinsic distinctive brand-related features, ‘Luxe’ is going to have the

strongest increasing effect on brand equity of luxury brands

H1c: The luxury brand Chanel has the most positive increasing effect when taking extrinsic

distinctive brand-related features into account, on the brand equity compared with the other luxury brands (e.g. Armani and Hugo Boss).

Brand Equity Extrinsic distinctive brand-related features - ‘Klassiek’ - ‘Luxe’ - ‘Duur’ - ‘Chique’ - ‘Elegant’ - ‘Fris’ - ‘Jong’ - ‘Mannelijk’ - ‘Italiaans’ - ‘Mode’ - ‘Klasse’ - Zakelijk’ - ‘Pakken’

Hypotheses 1a – 1c: brand-related features are the results of the pre-test.

H2a: The extrinsic distinctive features ‘Price / Quality’, ‘Advertising / Brand’ and ‘Relational

factors’ have a positive effect on the brand equity of luxury brands

H2b: ‘Price / Quality’ is the most important extrinsic distinctive feature when respondents

consider purchasing a luxury brand.

Hypotheses 2a en 2b: general extrinsic distinctive features are used for testing.

H3: In general, explicit intrinsic distinctive features (i.e. smelling) have an increasing effect on

the value equity of luxury brands.

H4: The intrinsic distinctive features of Chanel have the highest impact on value equity

compared with the other luxury brands (e.g. Armani and Hugo Boss).

2.5 Customer Equity

Both marketing theory and practice of the last 50 years is customer-centred (Vavra, 1997; p. 6-8). One can say that there is a shift from product-centred thinking to customer-centred thinking, which need also a shift from a product-based marketing strategy to a customer-based marketing strategy (Rust, Lemon & Zeithaml, 2004). Based on this fact one can say that the strategic opportunities for a firm are located in the improvement of the drivers of its

Extrinsic distinctive features

Brand Equity

Intrinsic distinctive

features Value Equity

- Smelling - Advertising / Brand - Price / Quality - Relational factors

customer equity (Rust et al., 2004). Thereby, customer centrism is essential to a firm for growth (Vogel, Evanschitzky & Ramaseshan, 2008). Customer equity is critical to a firm’s long-term success and is a proxy for the firm’s value (Lemon et al., 2001). Customer equity is all about the right value proposition for the right people, in order to attract, keep and grow customers’ equity to increase profitability and firm value. This concept is a combination of customer value management (i.e. value equity), brand management (i.e. brand equity) and relationship / retention management (i.e. relationship equity) (Vogel et al., 2008; Lemon et al., 2001). Customer equity results in the creation of customer attraction and customer retention, which leads to todays and future customer lifetime values (Lemon et al., 2001). As mentioned before, customer equity is the key to value but understanding how to enhance and manage customer equity is more complex (Lemon et al., 2001). The most important thing is how to grow and to create a significant competitive advantage. The three key drivers of firm’s growth (i.e. customer equity) work both together and independently. Knowledge about the investigation of these drivers helps growth of both the customer equity and the firm’s value. Each driver has specific, incisive actions or levers, which the firm can use to improve its total customer equity (Lemon et al., 2001).

The first driver, value equity is the objective assessment of utility of a brand, which is based on the cost benefit balance of the consumer (Vogel et al., 2008). The drivers of value equity are quality, price and convenience (Rust, Zeithaml, Lemon, & Kranen-van den Ham, 2001; p. 22). Second, brand equity is the subjective assessment of a brand above its objectively perceived value (Vogel et al., 2008). This equity is based on drivers such as brand awareness, brand attitude / image and corporate ethics (Rust et al., 2001; p. 22). The third driver of customer equity is relationship equity, which is the tendency to stick with the brand beyond customers’ objective and subjective assessment of the brand (Lemon et al., 2001). Understanding behaviour is the key in this equity, why do customers show a typical behaviour? Why do they buy it now and in the future? Loyalty programs, special recognition and treatments, affinity programs, community programs and knowledge programs are drivers that are linked to relationship equity (i.e. retention equity) (Lemon et al., 2001). Vogel et al. (2008) show that customer perceptions of value, brand and relationship affect loyalty intention and future sales. Thereby, the authors demonstrate that customer equity drivers can significantly predict future sales, even after controlling for the current sales level. This finding is in line with the notation of Lemon et al. (2001) that value is the core of relationship of a customer with a firm. There is no brand equity and relationship equity if the product does not meet the expectations of the customer (Vogel et al., 2008).

To conclude, customer equity delivers the analytical tools to enable brand managers to understand which of the three drivers is the most important to the customers of the firm (i.e. buyer of a specific brand). Additionally, it shows which driver is the most effective to

keep customers loyal and to increase their purchases. If a firm has this understanding, it can identify the key opportunities for growth and weaken unexpected forces (Lemon et al., 2001).

H5: The customer equity of each luxury brand (i.e. Chanel, Armani and Hugo Boss) is

different.

2.5.1. Value Equity

All customers’ selections are manipulated by opinions about value, which are formed mainly by views on quality, price and convenience. These opinions are quite cognitive, subjective and rational. For example, there is a small argument about the price of products, or its objective features. One can say that the customer equity received from customer’s value perceptions is the firm’s value equity (Zeithaml, Lemon & Rust, 2001; p.18).

2.5.2. Brand Equity

Customers have opinions about a brand that are not clarified by the firm’s objective features. Brand equity is described as the customer’s subjective and intangible assessment of the brand. The firms marketing strategy and tactics form the brand valuation. The familiarities and links customers have with the brand are manipulating the effect of the firms marketing strategy. For example a particular car is seen as either sexy, or exciting, or classic. These opinions are reasonable, emotional, subjective, and irrational. Firms’ brand equity is the customer equity obtained from the subjective evaluation of the brand (Zeithaml et al., 2001; p. 22).

Brand Equity

Customer Equity

Retention Equity Value Equity

2.5.2.1. Information economics theory vs. brand equity

Information economics theory theorizes that customers’ ability to assess product quality in advance differs greatly across categories (e.g. easy inspection of quality before consumption) (Nelson, 1970). Brands serve as an important signal to reduce perceive risk, which explains the formation of brand equity from an information economics perspective (Erdem & Swait, 1998). Hence, the levels of perceive risk differs across categories; the conditions to build brand equity are also likely to differ. Luxury perfumes are considered as credence goods according to the information economics perspective (Fischer, Völckner & Sattler, 2010). The role of brand equity has to take into account that when it is not easy to evaluate quality of consumption. Hence, a strong brand identity is the key tool to attract new clients. For many products and services, it is possible to “try before you buy” or to easily evaluate the quality of specific attributes prior to purchase. Since it concerns luxury brands, consumers expect a certain quality (i.e. value for money) and consumers must use different cues for quality (Lemon et al., 2001).

H6: Since luxury brands (e.g. luxury perfume brands) are considered as credence goods

according to the information economics perspective, brand equity will have the highest impact on customer equity compared to the other 2 drivers.

2.5.3. Retention Equity

While some customers buy only once from a firm, others are retained and continue to buy more. Moreover, some of the business sales come from customers who did not prefer the firm last time or are new in the branch. For customers who are buying in a repeat way, retention plans and relationship-building events can chances that the customer keeps to preferring the firm (Lemon et al., 2001). Retention equity is one of the drivers of customer equity, which is received from retention plans and relationship making activities (Zeithaml et al., 2001; p. 23).

A company is advised to first discover customer equity drivers to create the largest differentiation in its market. It is equally important to keep in mind that the outcomes are not the same in every market. For example, in some markets (e.g. telephone facility) value equity is the core driver (Zeithaml et al., 2001; p. 18). In contrast, to the transaction-oriented markets (e.g. customer goods) brand equity is essential (Zeithaml et al., 2001; p. 18). Moreover, in some relationship-oriented markets (e.g. finance sector) retention equity is the main driver (Zeithaml et al., 2001; p.18).

2.6 Consumer characteristics

There are five basic dimensions of personality; in literature these are often referred to as the Big Five personality features. The five personality dimensions are formed out of the following personally traits (i) extraversion, (ii) agreeableness, (iii) openness, (iv) conscientiousness and (v) neuroticism (Fiske 1949; Cattell, 1965; McCrae & Costa, 1987). The Big Five is a wide-range of classes’ personality features. The first personality feature - extroversion includes characters like excitability, sociability, talkativeness, assertiveness and a big amount of emotional self-expression. Agreeableness characterizes prosaically behaviours like trust, altruism, kindness and affection. The most common features that conscientiousness incorporates are a high level of thoughtfulness, with good impulse control and goal-directed behaviour. People with a high level of conscientiousness are organized and are mindful of details. Neuroticism describes individuals who experience emotional instability, anxiety, moodiness, irritability and sadness. The last dimension, openness, includes features that are characterized as imagination and insight. People who have a high score in this dimension have wide ranges of interests (McCrae & Costa, 1987). An important note is that each of the five personality dimensions represents a range between two extremes. For example, extroversion represents a continuum between extreme extraversion and extreme introversion. Because in real world people’s behaviour lies somewhere in between these two extremes. Nevertheless, according to Aaker (1997), only three of the five human personality dimensions (i.e. Big Five), namely agreeableness, extroversion and conscientiousness, correlate with the brand personality dimensions sincerity, excitement and competence. Aaker (1997) shows that both agreeableness and sincerity create the sense of acceptance and warmth. Furthermore, extroverts choose competence brands to express their consistent personality (Aaker, 1997; Mulyanegara & Tsarenko, 2009).

To conclude, consumers who are main on a specific dimension of the Big Five are likely to select a brand personality, which is related to that, dimension or is nearby to it (Mulyanegara & Tsarenko, 2009). Additionally, Aaker (1997) demonstrates that human and brand personalities differ from each other in the way of shape. Human personality is shaped by behaviour, physical characteristics, demographic characteristics, attitudes and beliefs. In contrast, brand personality is shaped by a certain direct or indirect interaction between the consumer and the brand (Plummer, 1985 in Aaker, 1997). Thereby, Huang, Mitchel and Rosenaum-Elliot (2012) show that consumers mirror their personalities by the brands they use. The authors state that the connection between brand preferences and the symbolic dimensions extraversion, agreeableness, neuroticism and openness to experience is bigger than the connection with a functional dimension like conscientiousness. The design of this connection exists in reliable crossways between numerous types of products. Consumers select a brand with comparable features to both symbolic and utilitarian products (Huang et

al., 2012). A personal relationship starts when consumers find similarity between their personality and the brand characteristics. Nowadays, customers interact with brands like these are real persons (Aaker & Fournier, 1995; Mulyanegara & Tsarenko, 2009). Furthermore, to be successful as a brand it is important to create distinctive features that are related to the personality of the target audience (Mulyanegara & Tsarenko, 2009). Mulyanegara, Tsarenko and Anderson (2009) define personality as ‘’the intrinsic organization of an individual’s mental world that is stable over time and consistent over situations’’. Consumers use brands to express their personality. Thereby, they consequently choose to use brands that are comparable to their own personality (Mulyanegara et al., 2009; Huang et al., 2012). Customers like to show their personality to others by the use of a particular type of brand (Mulyanegara & Tsarenko, 2009; Huang et al., 2012). A brand personality is attractive to consumers who want to define, support or improve their sense of self (Park & John, 2010). The authors show that customers with inherent ideas about their personalities are affected by brand experience, which results in an increase of positive beliefs of themselves on personality characters related to the brand they use.

H7a: Customers characterize themselves mostly as being agreeable compared to being

extrovert, open, neurotic, and conscious.

H7b: Being an extrovert has a larger positive effect than being agreeable on brand equity.

H8a: The effect of intrinsic features on value equity is moderated by customer characteristics

such that when people are highly agreeable, extrovert, open, conscious and are not neurotic they will have a higher value equity.

H8b: Openness has a larger positive effect than neuroticism on value equity.

Intrinsic distinctive features Value Equity Consumer characteristics - Extroversion - Agreeableness - Conscientiousness - Neuroticism - Openness - Smelling

2.7 Research objective and research question

The aim of this research is to show in which way both intrinsic and extrinsic distinctive features explain the brands’ essence and if it leads to brand managers creating a sustainable customer equity of their luxury brand in order to design a significant and solid differentiation without weakening the brands’ essence.

‘’In which way do consumer characteristics moderate the relation between intrinsic and extrinsic distinctive (brand-related) features of luxury brands and their customer equity?’’

In short, so far little is known about how brand managers can differentiate their luxury brand to minimize its sensibility to the competitive environment and raise the customer equity of their luxury brand toward its key target audience, without weakening the brand's essence by the focus on both intrinsic and extrinsic distinctive features.

2.8 Conceptual model

All the above suggests that in order to show the difference between both intrinsic and extrinsic distinctive features of luxury brands (i.e. fragrances brands) in relation to their customer equity and how this relation compares and relates to each other, how this relation differs on the basis of consumer characteristics. Extrinsic and intrinsic distinctive features are the independent variables (predictors) and customer equity is the main dependent variable. This research tests if value equity mediates the effect of intrinsic features on customer equity. In this way, the mediation effect of brand equity on the relationship between extrinsic features and customer equity is tested. Moreover, this research investigates whether consumer characteristics moderates the two aforementioned relationships. This explanation results in the follow conceptual model.

3 EMPIRICAL RESEARCH

3.1 Brands

This research includes three luxury brands, Chanel, Armani and Hugo Boss. These luxury brands both represents product groups such as fashion, accessories and cosmetics (e.g. perfume). In this research, the focus is only on the product group cosmetics (e.g. perfume). This paragraph provides an explanation for the selection of the brands in this study. The researcher chooses the brands selectively; because of her nine-year work experience in the beauty industry her subjective meaning is valid.

3.1.1 Chanel

Chanel is interwoven with the personality of its creator, Coco Chanel and her lifestyle, thereby defining it as a typically French brand (Hines & Bruce, 2007; p. 132). Since 1920, lifestyle branding can be found in the brand communication strategies of Chanel (Fernie, Moore, Lawrie & Hallsworth, 1997). Apart from the design of clothes, Coco Chanel claims the development of a lifestyle (Fernie et al., 1997). She early recognized the two essential dimensions of luxury branding (Fernie et al., 1997). First, a fashion brand needs to become a lifestyle brand. Second, create a fashion lifestyle brand that not everyone can afford (Fernie et al., 1997), due to the fact that Chanel launched many brand-line extensions. Perfumes and other beauty products create accessibility of the Chanel brand (Fernie et al., 1997). She created the standard of luxury branding, a link is one of Coco Chanel statements: ‘’Luxury is the necessity that begins where necessity ends’’ (Fernie et al., 1997). Chanel ranks first on the list of world’s most-coveted luxury brands in a report of Nielsen in 2008 (Stankeviciute & Hoffmann, 2010). Chanel implies a classic and elegant image (Hwang & Kandampully, 2012). Related to this fact Hwang and Kandampully (2012) show that customers who have sophisticated characteristics are most likely to react positive to brands like Chanel. The researcher selects Chanel in this study because it is a typical French brand with differentiating features in the luxury industry and a long brand history.

3.1.2 Armani

Armani is one of the most diverse brands, as said by the Economist in 2004 (Stankeviciute & Hoffmann, 2010). The ‘’refinement of essentiality’’ represents today the essence of Armani’s style (Saviolo, 2002). The message from Armani’s communication is: be yourself in a fine manner: do not mask yourself by following trends, which do not belong you, find your own style (Saviolo, 2002). Giorgio Armani has full control on everything the brands represents also in its communication campaigns (Hines & Bruce, 2007; p. 169). Armani has a wide

brand expansion into different luxury sectors but the brand core is still fashion. Giorgio Armani is by origin a fashion designer with typical Italian features (FragranceX, 2016). Nowadays, the Armani brand focuses on all target segments of apparel consumers (Saviolo, 2002). Armani Exchange (e.g. high-end brand of Armani) is never sold in the same department store as Armani fragrances because of the different target audience (Michaels, 2008). All that represents the Armani brand relies on quality with respect for the fundamentals of luxury; the ‘’Armani touch’’ (Stankeviciute & Hoffman, 2010).

The perfume house of Armani is quite young; his first perfume was launched in 1982 (Groom, 2012; p. 94). Smooth colours and soft shapes characterize the overall Armani brand (Saviolo, 2002). The advertisements of Armani explain timeless elegance and focus on experience and emotion (Giorgio Armani Beauty, 2015). The perfumes aim to give a sense of more freedom and are naturally like a second skin (Saviolo, 2002). The researcher selects this brand in this study because it is a typical Italian brand with differentiating features in the luxury industry.

3.1.3 Hugo Boss

By origin, Hugo Boss designs suits for men (Hugo Boss, 2016). Nowadays, this brand has a global image, which offers a large variety of products (Hugo Boss, 2016). For example, the perfumes are produced under licensees of Procter & Gamble (Procter & Gamble, 2014). The name Hugo Boss represents dynamics, sports, glamour, fun and especially recent lifestyle trends (Matthiesen & Phau, 2005).

It is likely to be important for brands that they are associated in the news with the right things to enhance the brand value (Has & To, 1995). This is exactly what Hugo Boss envisaged by the launch of their new perfume Boss Orange in 2011 (Has & To, 1995). This was not a regular luxury campaign, like most of the other perfume advertisements (Has & To, 1995). In this campaign Hugo Boss talks about the importance to develop schools in Madagascar. By using celebrities like Sienna Miller and Orlando Boom the campaign has had a big impact and Hugo Boss donated a large account of money to build schools in Africa (Has & To, 1995). The researcher selects this brand in this study because it is a typical German brand with unique features in the luxury industry.

3.2 Research design

The methodology to test the hypotheses will be further explained in this chapter. First, the motivation regarding the selection of brands in this research will be explained. Then, the three tests of the research design (e.g. one pre-test and two main tests) will be discussed. An overview of the three tests in this research is given below.

Pre-test

Qualitative pre-test 1 aims to justify the selection of brands and to evoke the current brand’s extrinsic distinctive features. For this investigation a survey is used (see appendix A).

General – baseline (i.e. zero) measurement

Main analysis 1 aims to measure the customer equity and its three drivers (i.e. value equity, brand equity and retention equity) of three luxury brands (i.e. Chanel, Armani and Hugo Boss). For this investigation a survey is used (see appendix B). This main analysis investigates the relative position of the three luxury brands in relation to customer equity and three drivers. This measurement represents a zero basis for further analyses.

Specific – follow-up (i.e. first) measurement

The follow-up measurement (i.e. main analysis 2) aims to investigate a relative change in the baseline (i.e. zero basis) of main analysis 1, by specifying and focusing on the extrinsic and intrinsic distinctive features of the three luxury brands.

Main analysis 2.1 examines the extrinsic distinctive (brand-related) features of three luxury brands in relation to customer characteristics and brand equity. For this investigation a survey is used (see appendix C).

Main analysis 2.2 investigates the intrinsic distinctive features of three luxury brands in relation to customer characteristics and value equity. For this investigation a blind fragrance test and additional survey is used (see appendix D).

The main analyses have the intension to measure the hypotheses and the conceptual model.

3.3 Qualitative pre-test

The pre-test uses a qualitative research method to identify the extrinsic distinctive features that customers currently associate with the three luxury brands Chanel, Armani and Hugo Boss.

3.3.1. Sample restrictions

A short qualitative questionnaire is conducted among at least 30 respondents. Since it is an exploratory questionnaire to gather preliminary data for the main analysis, the amount of 30 is justified (Saunders, Lewis, & Thornhill, 2012; p. 235). In this research respondents need to meet a number of conditions. First, respondents are Dutch and currently live in the

Netherlands. This is because the brand images consumers have in mind in the Netherlands

advertising strategies. Second, the respondents’ stage of life and knowledge has big influences on the brand image of luxury brands. Since customers of a perfumery cover the largest part of the researcher’s network and work environment, the research focuses on this group, thus the respondents involve luxury brands. Third, the respondent’s age are at least

about 16, since the buying power of customers starts at the age of 16, because (generally) at

that moment they start working. Fourth, respondents are familiar with the luxury brands

(perfume) Chanel, Armani and Hugo Boss. These respondents hold more elaborate cognitive

maps in their minds and are therefore also able to give valuable and applicable features of the luxury brands. Brand owners have more extensive cognitive maps than non-owners, this means that the knowledge of a product or brand highly depends on the experience of the customer with the concern of a product or brands (Van Rekom, Verlegh & Slokkers, 2009). Therefore, respondents are luxury brand (perfume) buyers or users. The respondents are recruited mainly from the personal and professional network of the researcher.

3.3.2 Method

An interesting, simple and non-threatening opening question is important (Saunders et al., 2012; p. 332). The questionnaire therefore starts with a simple question to ask respondents to indicate whether they now or then buy perfume every now and then. This information is needed in order to validate the sample (Saunders et al., 2012; p. 331). Because of the importance of this research and to avoid the risk that respondent’s dropout quickly, the questions that are directly relate to the research question are asked in the beginning of the questionnaire (Saunders et al., 2012; p. 332). The questionnaire therefore continues with the open question asking respondents which features they associate with each brand. In order to make the aim of the question more clearly to the respondents, the question has a short introduction. There are no examples given in this introduction since examples might influence respondents’ answers and it is very important that respondents write down every kind of feature that comes to their mind when thinking of the luxury brand (perfume). Based on the

‘Twenty Statement Test’ develops by Kuhn and McPartland (1954), respondents are

provided with 20 numbered blanks to fill in all features they associate with the three different luxury brands (e.g. perfume), to test the familiarity with luxury brands. However, there are many different ways to interpret the term familiarity. Familiarity refers to the amount of knowledge one has about the three luxury brands. Or, how many years you know the brand, just the simple notion of whether you have ever heard of the brand or maybe the combination of this all. Hence, familiarity is a construction that consists of multiple items (Rossiter, 2002). Churchill (1979) shows that the investigation of consumers’ perceptions towards brands by a measurement consist of multiple-item scales, which lead to a higher predictive validity than

by the use of single-item scales. More of the information of familiarity captures by measure the variable familiarity with the items familiarity, experience and knowledgeable (Churchill, 1979; Kent & Allen, 1994). Hence, respondents in this research rate on a five point Likert measurement scale how ‘unfamiliar / familiar’ (helemaal niet bekend / heel erg bekend), ‘inexperienced / experienced’ (helemaal geen ervaring / heel erg veel ervaring) and ‘knowledgeable / not knowledgeable’ (helemaal geen kennis / heel erg veel kennis) they are with the three luxury brands (i.e. Chanel, Armani and Hugo Boss). A five point Likert measurement scale justifies the criteria, since this is the most use item rating scale for measuring brand product images (Saunders et al., 2012; p. 379). Respondents who indicate that they are not familiar with the brands Chanel, Armani and Hugo Boss are removed from the data set, since reasonable features knowledge of a brand requires some familiarity with the brand. The questionnaire starts with some questions to obtain classification information concern gender and age. In this pre-test, the assignment of respondents is randomly. See appendix A for the questionnaire of the pre-test.

Regarding the limited time given for the investigation, the questionnaire is web-based. The online version of the questionnaire justifies a relatively short length, moderate complexity and variety and an extensive introduction of question (Saunders et al., 2012; p. 398).

3.3.3. Results

In total 31 respondents completed the questionnaire. They all meet the pre-set conditions as discussed in the subparagraph 3.3.1. The age of the respondents lies between 20 and 58 years with an average of nearly 28 years. 16% of the respondents are men and 84% are women. This is probably due to the subject of the questionnaire; during the recruitment of the respondents women are likely to show more interest to participate in a research about luxury brands (e.g. luxury perfume brands) than men. The skewed distribution in terms of gender is something one should keep in mind during the analysis of the results but is not problematic since the same dominating interest of women in filling in a questionnaire about luxury brands is expected during the recruitment for both main analyses.

Table 3.3 - 1 implies, that the Cronbach’s alpha of construct Familiarity with the brand is for all three brands significantly above the threshold of 0.70, meaning that the three items are a reliable scale to measure the construct.

The familiarity with the brand Chanel is the highest with a score around 4 (i.e. familiar). This was to be expected since this brand has the biggest market share in the cosmetics industry, for example four Chanel perfumes are in the list of the 10 most sold perfumes in the Dutch market. In comparison Armani has two perfumes and Hugo Boss has only perfume in this list (Douglas, 2015). Apart from that, Chanel has a well-known brand story. The average score

on the item ‘How knowledgeable are you with…’ is in most cases lower than the average scores on the other two items. One can say that respondents consider knowledge of a brand as more intensive than familiarity and experience with the brand. Overall the average familiarity with the three brands is 3.47. This is considered an appropriate result for the pre-test since respondents have enough knowledge about the brands. Thus, respondents have a development of association networks in their minds, which lead to more features (in 4, 8 en 12 of the pre-test questionnaire) (Alba & Hutchinson, 1987).

Table 3.3 – 1. Average familiarity and reliability of the measured construct Note: the numbers between brackets are the standard deviations

71% of the respondents name 8 features for Chanel. On average the respondents give around 5 a 6 features for Armani and Hugo Boss. A list containing all features of the brands given per respondents is available from the researcher upon request. However, a lot of features are synonyms for each other or capture the same concept. To get an overall definitive idea of the respondents’ perception of the three brands, the features that are very similar to each other in definition as ‘Luxe’, ‘Stijlvol’ and ‘Netjes’ are grouped and recoded under one code. However, due to the enormous amount of different features, the interpretation of the features is not always clearly fixed. In order to ensure the reliability of the recoding a second independent person also recoded the brand-related features. Subsequently, the results of the recoding of the researcher and the second independent re-coder are compared. The amount of features that was recoded by both re-re-coders is 213 for Chanel, 178 for Armani and 172 for Hugo Boss. To come to a full reliable set of features as basis of main analysis 2.1, all differently coded features are discussed by the researcher and the second re-coder until they agree upon a recode, which leads to a final reliability of 100% for the features of Chanel, Armani and Hugo Boss. Table 3.3 - 2 shows the amount of features before and after re-coding. Appendix E shows an overview of how the features are exactly recoded (see table 3) and the 10 most frequently mentioned features per brand (see table 2).

Table 3.3 - 2. Elicited features of Chanel, Armani and Hugo Boss

After the re-coding, the features are arranged in order of frequency. Respondents write down consensual and more subjective features all in different orders. So there is no particular pattern or imaginary boundary in the order of respondents’ answers. But an interesting finding is that the feature ‘Klassiek’ for the brand Chanel is mentioned very frequently. Thereby, more than 50% of the respondents name ‘Luxe’ in the top 3 features of Chanel. For the list with all features in order of frequency, see Appendix E. Figure 1 shows all extrinsic features of each luxury brand in word clouds. Subsequently, the five most frequently mentioned features for each of the three brands are selected. These features are considered to be the most salient for the brands and in main analysis 2.1 are used as input. The selection of five features gives a holistic view of the brand essence due to the greater diversity of included features. Table 3.3 - 3 shows the ultimately selected features of Chanel, Armani and Hugo Boss.

3.3.4. Conclusion (overview) of results

By conducting of a qualitative pre-test by means of a short qualitative questionnaire the features that consumers who are familiar with the three luxury brands currently associate with the brands Chanel, Armani and Hugo Boss are elicited. After re-coding quite similar features, the five features of each brand are selected since these are considered to be the most salient ones for the brands. These brand-related features are the basis for the questions in main analysis 2.1.

In this research Chanel is perceived as being distinct from the rest of the brands, since the features of Armani and Hugo Boss overlap (e.g. ‘Mannelijk’). The findings of this research show that Chanel is mainly seen as a classic, luxurious, expensive, chic en elegant brand. The respondents of this research perceive Armani as a fresh, young, male, Italian and fashion brand. The third luxury brand in this research (i.e. Hugo Boss) have the follow brand-related features: class, business, male, suits and accessible. Subparagraph 4.1.1 discusses the findings of the pre-test.

3.4 Analytical strategy main analyses 1 and 2

Statistical test assumptions

First, the research checks the data for missing values and the scale means are computed. Thereafter, the data is examined for skewness and kurtosis per variable. A normal distribution of the data is a main criterion during the conduction of ANOVA’s and regression analyses (Field, 2013; p. 348). Hence, the normality of the dependent variables and their residuals is tested.

Missing Values

In total 313 participants take the survey. There is only one incomplete survey. Since this respondent is the only respondent who answered only 1 of the 41 questions, he/she is excluded from further analysis. No other missing values are found.

Recoding

There are no counter-indicative items, so no re-coding of data in this research was necessary.

Reliability

In this study, there is no reliability testing since there are no multiple-item scales. The main reason for this is that both different brands and equity drivers are used. Moreover, the focus